Dutch Disease

‘Dutch Disease’ refers to a situation where growth in income from natural resources damages other sectors of a country’s economy. This happens because increased revenues from natural resource exports tend to increase the value of the exporting nation’s currency. That makes the country’s other exports, such as agricultural products and manufactured goods, more expensive and therefore less competitive in world markets. The economy thus becomes over-reliant on the natural resources that it is exporting—and this can be particularly damaging if, for any reason, there is a drop in world price for those natural resources.